HomeMy WebLinkAbout2013 06-03 CCP Joint Session with Financial CommissionAGENDA
CITY COUNCIL/FINANCIAL COMMISSION JOINT WORK SESSION
June 3, 2013
6:30 P.M.
Council Chambers
City Hall
1. Call to Order
2. Approval of Agenda
3. Establish Priorities for 2014-2015 Budget
4. Miscellaneous
5. Adjourn
All materials will be provided at the meeting.
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METRO CITIES
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2013 LEGISLATIVE SESSION RECAP
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Governance
The 2013 Legislature brought a shift in legislative majorities in both the House and Senate and new leadership in the
majority and minority caucuses in both bodies. 2013 was a budget setting year for the Legislature, and many issues, some
high profile and controversial, were on the legislative agenda this year, resulting in an intense, fast moving legislative
session. The 2013 Legislature completed the2013 session last Monday, and the 2014 session will convene on February
25, 2014. The Governor to date has signed 144 bills and used line item veto authority on three of them.CATIC
Press and Significant progress was achieved on several key issues of interest to Metro Cities and we worked to advance andPublications respond to many legislative initiatives this session. Below is a recap of legislative results of interest to Metro Cities.
2013 Legislative
Policies
TAXES
And follow
Included in Governor Dayton's initial budget recommendation was a proposal to expand the sales tax to a range of
services, including business to business services, which was highly contentious from the start. After the February budget
forecast showed a lowered state budget deficit of $627 million, compared to $1.09 billion last December, the Governor
dropped the sales tax base expansion from his supplemental budget recommendations in March. Governor Dayton and
the legislative majorities proposed a number of initiatives to raise revenues, taking some similar as well as separate
approaches, to balance the state budget and propose investments in several areas of the state budget, notably education
and property tax relief. The final tax bill that passed the Legislature and has been signed by the Governor raises $2.390
billion in new revenues.
Reinstatement of Sales Tax Exemption for Cities and Counties
Metro Cities and the League of Minnesota Cities worked to advance a reinstatement of the exemption for cities and
counties in paying state sales tax, the efforts of which helped secure this long-sought after law change this session. Metro
Cities' policies have long opposed having local governments pay sales tax, but legislative traction on this issue, despite
persistent efforts, has been hard to achieve in the years since the state sales tax was first applied to municipal purchases
in 1992, because its repeal was expensive (the current estimate is $115 million). School districts, libraries and other public
entities are not subject to state sales tax. A handful of exemptions are currently allowed for cities and counties; the new
law will fully reinstate the exemption for cities and counties, with the exception for goods/services normally provided by a
private business.
This year, the Governor's recommendation to apply the sales tax to business to business services generated a fresh
examination of why local governments pay state sales tax. Senator Ann Rest (DFL - New Hope), who chairs the Senate
Tax Reform Division, took on this issue as an important component of tax reform, and the proposal to reinstate the
exemption, which was introduced in three separate identical bills, was included for in the Senate's omnibus tax bill. The
provision was included in the final legislation and will be effective for purchases made on or after January 1, 2014.
Metro Cities thanks the cities of Plymouth and South St. Paul for providing testimony on this important issue, and for
information provided by numerous cities to assist these efforts. This is an issue we are very pleased to put to rest.
Local Government Aid
The Governor's budget recommendation included a new Local Government Aid (LGA) formula that would have reduced
the number of program need factors from seven to three, and increased the total appropriation by $80 million, with roughly
three-fourths of the new funds going to cities in the metropolitan area. The proposal drew immediate criticism from a
variety of quarters, including interests in greater Minnesota. This opposition would have created steep legislative
challenges for the proposal. Metro Cities was pleased that the Governor's budget recommendation recognized the
inadequacies of the current LGA program in addressing metro city needs. Metro Cities has worked to highlight and
address this shortcoming for the last several years.
Although the Governor's initial proposal did not gain legislative support, it served a key role in creating momentum to
reformulate a program long in need of reform. The House Property Tax Chair Rep. Jim Davnie (DFL — Minneapolis), took
up the charge and brought city organizations, including Metro Cities, together to work on improving the formula in a way
that could find consensus among all city interests. Metro Cities, the League of MN Cities, the Coalition of Greater
Minnesota Cities, the cities of Minneapolis and St. Paul, Rep. Davnie and other legislators and House research staff spent
many hours over a series of weeks to examine the program and methods for how it could be improved to better serve
cities with diverse needs and characteristics, improve equity in distribution, and make the program more transparent and
understandable.
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These efforts were successful and a new formula was created. The new LGA formula will be more geographically
equitable in terms of aid distribution, better account for the diverse needs of cities across the state and will be less volatile.
The consensus formula bases aid on a city "aid gap" that measures the gap in a city's aid appropriation and its unmet
need. The program eliminates "side pots" and will minimize volatility in the distribution of aid from year to year. The
program uses a single formula with a three tier need calculation, with separate need factors for cities under 2,500, cities
between 2,500 and 10,000, and cities over 10,000. The program uses regression analysis (as does the current program)
to explain variations in city spending/revenues for different size cities. The three tiers all use levy plus aid to determine a
city's revenue capacity. The LGA bills were carried by Senator Roger Reinert (DFL — Duluth) and Rep. Ben Lien (DFL —
Moorhead). Metro Cities appreciates their important efforts.
The new program will increase the overall share of LGA to the metropolitan area from 30% to 40%, with metropolitan area
cities receiving approximately 50% of the new revenue. Forty one additional cities will receive aid under the LGA formula.
The majority of these cities are located in the metropolitan area.
The consensus formula was a true compromise in the best sense. To generate a 'win" for everyone, all city organizations,
including Metro Cities, both gained and conceded some important aspects to arrive at a new formula that benefits cities
across the state. This compromise will serve to reinvigorate the state and local partnership and bodes well for the long-
term sustainability of the LGA program.
The city organizations also supported an inflation component for the LGA program to stabilize the distribution of aid, which
passed the House but was not included in the Senate bill. The inflator was ultimately not included in the final tax bill,
although the new law increases the LGA appropriation by an additional $1.5 million in 2015 and $1.5 million in 2016. CI_ It
here for a spreadsheet.
Levy Limit/Property Tax Savings Reporting Requirement
The new tax law includes a one year levy limit for cities and counties for taxes payable 2014 that was proposed late in the
conference committee process and included in the final legislation. The original proposal established an actual property tax
freeze. City organizations worked with legislators and staff to get a more traditional and workable levy limit structure.
The new limit caps growth at 3% and includes exceptions for debt service, natural disasters, economic development
abatements and storm sewer improvement districts. The levy limit base for cities is the greater of payable 2012 or 2013
certified levy plus 2012 LGA, minus any special levies. This base is multiplied by 1.03%, to which a city's 2014 LGA is then
subtracted. No levy limit will be lower than the greater of the 2012 or 2013 certified levy. The levy limit exemption
contained in the local performance measurement reporting does not apply under this temporary levy limit.
The Department of Revenue is working to provide specific information and clarity on how the levy limit will be calculated.
Metro Cities will provide this information when it is available.
The law also contains a one year reporting requirement on the amount of actual or estimated sales tax payments, as part
of the truth in taxation process.
Property Tax Relief
In addition to the $80 million appropriation for Local Government Aid, the final tax bill provided a little over $330 million in
other property tax relief measures.
The new tax law expands the state property tax relief program known as the circuit breaker, renamed the "Homestead
Credit Refund", for $120 million. The bill also increases renters' credit refunds by $15.5 million and provides $10 million in
township aid, as well as $40 million in county program aid.
The law also provides property tax relief through two key areas of education finance — a Senate initiative that increases
operating referendum equalization for schools, with the first $300 of voter approved referendum eligible to be approved by
the school board rather than the voters and a new House initiated program called the"Location Equity Index" that provides
money equal to $424 per pupil for metro schools and $212 for certain larger rural center school districts. (Interactions
between the operating referendum equalization provision and location equity index have technical issues that are still
being examined).
Economic Development/Tax Increment Financing/Fiscal Disparities
The final tax bill contained provisions to assist several specific economic development projects across the state, most
notably the Mayo Clinic and Mall of America (MOA) expansions, which were strongly supported by legislative leadership
and the Governor.
The MOA provision allows the captured value of the MOA Tax Increment Financing (TIF) districts to be excluded from the
fiscal disparities pool over the next 20 years, at an approximate annual $9 million cost, and exempts Bloomington from the
final four years of the MOA's original loan repayments to the pool. (Metro Cities' policies oppose the use of fiscal
disparities for specific projects).
The new tax policy also provides $327 million in state assistance for public amenities and infrastructure related to the
Mayo "Destination Medical Center" expansion and includes special TIF provisions for Apple Valley, Bloomington, Ely,
Maplewood, Glencoe, Oakdale, St. Cloud and the Dakota County Community Development Agency. The bill also provides
a sales tax exemption for materials for Baxter International in Brooklyn Park and a sales tax break for materials to 3M in
Maplewood for a new research and development facility.
The new tax law does not include two general TIF law changes - an extension to the 2010 Jobs TIF statute and extension
to the 'five year' rule to 10 years. Metro Cities supported both of these initiatives. The bill does adjust the original net tax
capacity for TIF districts that suffered large reductions in tax capacity due to the new Market Value Homestead Exclusion
program.
The new law also increases the time allowed that a jurisdiction may hold property for economic development off the tax
rolls from nine to 15 years as long as the property was acquired after January 1, 2000 and before December 31, 2010
regardless of location, and for property located in a city with a population under 20,000 outside the metro area.
Other:
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Current/Archived Newsletters - Metro Cities Page 3 of 8
Special Service District and Housing Improvement Area Authority Extension
Metro Cities and the League of MN Cities were successful in securing an extension for cities to authorize Special Service
Districts and Housing Improvement Areas. The authority, set to expire on June 30, 2013, was extended 15 years, to June
30, 2028. Thanks to officials from White Bear Lake, St. Louis Park, Minnetonka and Coon Rapids for their testimony and
expertise and to Metro Cities staff Charlie Vander Aarde for spearheading this effort on Metro Cities' behalf.
Market Value Homestead Exclusion Program Clarifications
The bill provides clarifications to address debt limits based on market value due to the Market Value Homestead Exclusion
program.
Historic Tax Credit
In 2010, the Legislature passed an incentive for owners of historically significant buildings to preserve them. This year the
legislature extended the historic preservation tax credit for another six years. Another change allows the State Historic
Preservation Office of the Minnesota Historical Society to collect higher application fees based on estimated qualified
rehabilitation expenditures (0.5 percent, up to $40,000). The fee was previously capped at $5,000.
Mortgage & Deed Tax
A funding stream for cleanup and remediation in Ramsey and Hennepin Counties was renewed. The authority was
extended 15 years and will expire in 2018.
Police and Fire Aid
The new law appropriates $9 million for PERA Police/Fire amortization aid, $1 million for MSRS amortization aid and $5.5
million for voluntary firefighters.
4d Classification
The bill creates a second tier rate for 4d property (see explanation under Housing below).
TRANSPORTATION & TRANSIT
The 2013 session began with anticipation by many legislators and stakeholders for addressing the ongoing significant
transportation funding needs in the region and state. The Governor's Transportation Finance Advisory Committee (TFAC)
late last year identified myriad ongoing transportation needs and possible funding sources. While the report didn't address
all system needs, it provided an important assessment of long term unaddressed transportation needs. The Advisory
Committee's recommendations included a 'world class,' economically competitive multi-modal transportation system and
identified financing streams to partially address a current $50-55.5 billion shortfall as well as funding for a world class
system beyond the current $36.8 billion the state currently spends.
The TFAC's recommendations included:
•An increase in motor vehicle registration fees by 10% to generate $1.1 billion over 20 years; increase to the per-gallon
excise tax on motor fuels to raise $15.2 billion over 20 years; $9 billion for the County State Aid (CSAH) system and $2
billion for the Municipal State Aid (MSA) system.
•Increase in the metro area transit sales tax collected in Ramsey, Hennepin, Washington, Anoka and Dakota counties
from .25% to .75% to raise an additional $200 million per year for transit in the metro area. Identified unmet needs in the
metro area transit system are estimated at $210-285 million per year over 20 years.
•Expansion of the transit taxing district to all cities in the seven county metropolitan area. The recommendation did not
include an increase or access to service for the approximately 50 cities currently outside of the district. Currently,
additional cities have been brought in concurrent with an increase in service. (Metro Cities' policies oppose expanding the
transit taxing district without a corresponding increase in service.)
•Utilization of local tools for cities and counties to be used on municipal and county systems including transportation
improvement districts. The Advisory Committee identified an additional $9 billion in unmet needs on the county road
system, $8 billion in unmet needs on the municipal road system and $500 million in unmet needs on the township road
system over the next 20 years.
As the legislative session got underway, the Governor signaled his opposition to a gas tax increase and included only the
metro transit sales tax increase in his budget. This set the stage for roads versus transit and metro versus greater
Minnesota dynamics that intensified as the session progressed. It quickly became apparent that there would not be a
transit package without funding for roads, but the Governor's opposition to the gas tax and few viable identified funding
alternatives resulted in an ultimately unachievable comprehensive package. Transportation funding bills in both bodies
stalled.
Late in the session, the House passed a lights-on transportation bill with no new increases for roads or transit, while the
Senate considered a 5.5% sales tax on the distribution level for gas with a 6-cent reduction at the pump, but eventually
passed a lights-on package out of the Tax committee. A subsequent floor amendment provided a 4-year phased in 5-cent
gas tax increase and a 4-year phase in of a 7 county 'A cent transit sales tax.
In the end, attempts to include new funding ultimately fizzled as they lacked sufficient legislative agreement and
gubernatorial support. In negotiations, the Legislature and the Governor discussed a proposal to combine a transit tax
increase and $500 million in new bonding for roads but that proposal never found the necessary support for passage.
Although no comprehensive funding package passed this year, the final bill that passed comes with some new funding
tools:
•VVheelage tax authority to all 87 counties at $10 per vehicle and up to $20 per vehicle starting in 2018. Current law
allows only metro counties to impose a $5 wheelage tax.
•Removal of the referendum requirement for Greater Minnesota counties to impose a half cent local option sales tax for
htto://www.metrocitiesmn.org/index.asp?Type=B BASIC&SEC=V07b3738C3A0-1B97-40... 6/2/2013
Current/Archived Newsletters - Metro Cities Page 4 of 8
transportation.
•Corridors of Commerce program created with a one-time infusion of $300 million in trunk highway bonds. This program
is designed to channel funds to state highway projects that improve commerce under a formula to be established by
MnDOT.
•Re-establishment of the Transportation Economic Development program (TED). The program is funded with $10 million
per year in existing trunk highway dollars.
•Funding to the Metropolitan Council is allowed to rise back to its forecasted levels to pay the state's share of general
funds for operating costs for transit.
STREET IMPROVEMENT DISTRICTS
A bill authorizing cities to implement street improvement districts gained significant support this year, passing out of six
committees in the House and Senate, and off of the House floor as part of the omnibus Tax bill. The bill was drafted to
mirror authority that cities currently have to collect sidewalk, street light and storm water fees, and would allow cities to
create districts through which fees can be collected on all properties and then used within a district to construct,
reconstruct or do routine maintenance on streets. Over 80 cities passed resolutions of support for the legislation, but the
legislation continues to face stiff opposition from business groups, including the auto dealers.
After a long, winding legislative road, authorization for cities to implement street maintenance districts did not pass.
Nevertheless, the proposal proved to be an important factor in legislative debates until the final moments of the
Transportation Finance conference committee. The House language, which was more restrictive with respect to how funds
could be collected, had been set aside in the Tax conference committee, but a Senate bill version re-emerged in the
Transportation conference committee late in the session. The Senate language, which would have limited use of the funds
to maintenance, was proposed to be included in the Transportation bill just as the committee was finishing its business.
The amendment was set aside and not acted upon before the bill was adopted.
In the end, several key legislators continued to express concerns and were not comfortable with the provision being
included, indicating the bill needed additional work over the interim. Metro Cities is hopeful we can work with legislators to
generate compromise language that can be passed during the 2014 session.
ECONOMIC DEVELOPMENT
Budget
Economic development programs that are helpful to cities received increased funding in the FY2014 and FY2015
biennium. The omnibus Jobs and Economic Development Act, Laws 2013, Chapter 85, includes the budgets for DEED,
Minnesota Housing Finance Agency, Labor and Industry, the Department of Commerce and the energy budget. The
Minnesota Investment Fund (MIF) will receive $15 million each year, $30 million over the biennium, compared to $3 million
last biennium. $5 million from MIF is dedicated to the Baxter biopharmaceutical manufacturing facility in Brooklyn Park.
Thank you to the City of Coon Rapids for testifying how MIF has been effectively utilized in their city.
The Redevelopment Grant Program will receive a $6 million general fund appropriation in FY2014. Metro Cities testified
that general fund financing are very important to the success of this program because these funds offer greater flexibility
than bonding dollars which are restricted to publicly owned infrastructure.
A new pay for performance program titled the Job Creation Fund and touted as a successor to JOBZ, will receive $24
million in FY 2014-15. An application to DEED would be submitted by the local government, on behalf of a business. A
company is eligible to receive a grant if it has invested at least $500,000 in a capital investment project that includes a
new, expanded, or remodeled facility and create at least ten new full-time employee positions within two years or expend
at least $25 million in capital investment and retain at least 200 employees for projects located in the metropolitan area
and 75 employees for projects located outside the metropolitan area. Monies would be awarded by DEED directly to the
business.
At the end of session, a proposal to fund economic development projects in metropolitan cities which host landfills was
included in the budget. It appropriates $875,000 each year for development or redevelopment projects which add to the
host city's tax base.
Broadband Office
A recommendation from the Governor's Broadband Task Force called for a dedicated state office to implement broadband
infrastructure across the state. There was significant legislative debate about which state agency would be given this
responsibility. Currently, the Department of Commerce hosts an unfunded broadband office. Some argued expansion of
broadband is an economic development goal and the task should be given to DEED. The final resolution located the office
within DEED and funds it at $250,000 per year. The office will be headed by a gubernatorial appointee. The new law also
contains a provision that creates a database of road construction projects, allowing broadband infrastructure projects to
move forward in concert with transportation projects.
ORGANIZED WASTE PROCESSES
Legislation that eases the transition period for cities to move toward organized waste collection was enacted this session.
The new law reflects a negotiated agreement between cities and local independent haulers that requires a 60-day
negotiation period before the establishment of a waste collection study committee to allow existing licensed collectors to
develop a proposal which must address identified city or town priorities, including issues related to zone creation, traffic,
safety, environmental performance, service provided and price while preserving the market share of each hauler.
If the city agrees to the proposal the city may, after a public hearing, simply adopt an organized collection ordinance and
put the agreement into effect for a transition period of three to seven years. If the proposal does not meet the city's goals,
a committee can be formed to study all organized collection options without the costly and contentious 180-day mandated
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process for establishing organizing solid waste collection in current law. In the end, a city or town could still agree to a
consortium of existing haulers.
The bill was signed into law by the Governor and went into effect on May 8. Special thanks to the many city officials who
provided testimony and information to legislators as this bill moved through the legislative process and to Metro Cities staff
Todd Olson for his work on this issue.
LEGACY FUNDS
A contentious debate over the spending priorities of funds collected through the 3/8 of a cent sales tax lasted into the final
days of the legislative session. At the heart of the issue was whether the Legislature should accept or significantly change
the citizen recommendations forwarded from the Lessard-Sams Outdoor Heritage Council (LSOHC). The money collected
through a state sale tax is distributed through four funds: Clean Water Fund, Parks and Trails Fund, Arts and Culture
Fund, and Outdoor Heritage Fund. A final agreement on allocating funds from the Legacy constitutional amendment
passed the final day of session.
Metro Inflow and Infiltration Mitigation
Laws 2013, Chapter 137 the Legacy Funding Law, includes a Metro Cities initiative to incorporate funding for inflow and
infiltration (I/1) mitigation for private property using Clean Water funds. Whereas I/1 grants made available through the
bonding bill are available only for public infrastructure, grants through Legacy funds can be used to assist with I/1 mitigation
on private properties, which represents a significant portion of the I/1 problem. The Legacy Act includes $1 million,
$500,000 in each year of the next biennium for grants or loans to be made available through the Metropolitan Council to
assist high priority areas. Metro Cities will work with the Council on establishing parameters for a program. Stay tuned for
more information in the coming weeks.
Coal Tar
A ban on coal tar for resealing was included in the Legacy bill. It creates a statewide policy in response to a scattered
approach where some local governments had a ban while others did not. The ban on sales and use of coal tar is effective
January 1, 2014.
Mississippi River Critical Corridor
A provision in the Legacy bill reauthorizes the Department of Natural Resources (DNR) to commence rule writing for the
Mississippi River Critical Corridor. The DNR began writing rules in 2009 but did not finish in the allotted 18 months
agencies have to write rules. The new language allows the DNR to work on rules with no end date, but requires a report to
the Legislature on progress by January 15, 2014.
Water Supply
The Legacy bill included specific appropriations for groundwater and surface water funding. These include: $537,000 for
the US Geological Survey to investigate groundwater and surface water interaction in and around White Bear Lake and
surrounding northeast metropolitan lakes and $2 million to the Metropolitan Council for metropolitan regional planning
around water supply reliability and sustainability, including determination of a sustainable regional balance of surface water
and groundwater.
Parks
The battle over the balance between rural and metro parks ended with an agreement to fund a 40/40/20 share —40
percent to the metro, 40 percent to the DNR and 20 percent to Greater Minnesota regional parks. In the metro area, this
formula generated $33.8 million in grants for metro parks and trails. Of this amount, $16.8 million was in FY 2014 in the
first year and $17million is in FY 2015.
The debate over the Legacy funding recommendations continued after the legislature passed the Legacy bill. A number of
groups wrote to Governor Dayton, encouraging him to veto two appropriations which were not included with the LSOHC
recommendations. The Governor used his line item veto authority to reduce certain appropriations in the Legacy Act. In
doing so the Governor noted his pledge to preserve the authority of the LSOHC. One vetoed appropriation that was not
recommended by the Council was for $6.3 million from the Outdoor Heritage Fund "for grants to restore and enhance
wetlands, prairies, forests, and habitat for fish, game, and wildlife in the metropolitan regional parks system." The second
veto was for $3 million to protect aquatic habitat from aquatic invasive species, a project which never applied for funding
through the Council.
WATER
Water issues figured prominently at the Legislature this year. The House Environment committee spent numerous
meetings discussing studying, monitoring and understanding of water supply. The most significant proposal, supported by
the Governor and included in the House omnibus Environment bill, raised water appropriation fees on water users in need
of a DNR permit to a total of $6.8 million. Municipal water suppliers would have seen an increase from $10 per million
gallons to $15 per million gallons while agricultural users would have seen an increase to $35 per million gallons and non-
agricultural users would have increased to $75 per million gallons. The summer surcharge was also extended by two
months in the proposal.
Residential users not subject to water appropriation fees, primarily single residential wells, would not have been subject to
the fee but those on a municipal system would have seen an increase of about $1 a year. Large water users, farmers and
water intensive businesses would have been subject to much higher fees. The fees would have been collected by the DNR
and used to fund research on groundwater supply and quality.
The proposal to raise water use fees for ground and surface water permit holders was ultimately scrapped but the
proposed uses of the roughly $6 million in proposed fees were eventually proposed to be funded through a state general
fund appropriation in the omnibus Environment Finance bill, which passed and was signed by the Governor. The money
will be used to pay for compliance monitoring, education, enforcement of appropriation permits, water level monitoring,
surface water monitoring to measure interaction with groundwater, groundwater and surface water cumulative impact
assessment, and regional monitoring of cumulative impacts. There will be no legislatively mandated increase to municipal
water suppliers or agricultural and business permit holders to pay for the programs.
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Groundwater management area authority, which allows the DNR to limit water use in designated areas, was altered to
allow the DNR to limit water use in private wells and not just those who hold large water permits. Under the existing
authority, those on a municipal system could be required to limit consumption but those on private wells could not be. This
new language levels the playing field to ensure everyone using the water in a designated area has to play by the same
rules to ensure the sustainability of the resource.
DATA PRACTICES
The Legislature made changes to data practices laws that are of interest to cities. The omnibus data practices legislation
classifies citizen contact information as private data when citizens submit their information to cities to receive notifications
or as part of a subscription list for periodic publications. These include snow emergency notices, newsletters, crime
reports, and other general information sent by cities to residents. The law also makes certain contact information for
volunteers participating in community crime prevention programs private.
PENSIONS
The final pensions bill contains a number of measures to address financial solvency by establishing amended vesting
periods for newly hired employees (50% after 10 years and an additional 10% per year until reaching 100% after 20
years), and employee and employer contribution increases. The bill increases employee contribution rates from 9.6% to
10.2% in 2014 and 10.8% in 2015 and thereafter. The bill also increases employer contribution rates from 14.4% of salary
to 15.3% of salary in 2014, and to 16.2% of salary in 2015 and thereafter. The bill also increases penalties for early
retirement.
HOUSING
MHFA Budget
Programs to support a range of housing choices as well as preserve housing stock were funded this year. The Challenge
Fund, which requires private matches, promotes workforce housing. Governor Dayton insisted on a one-time $10 million
appropriation within the fund to build housing units in communities facing housing shortages, primarily in greater
Minnesota. A $5 million program increase gives the Challenge Program $28.4 million in total funding.
Preservation of affordable rental housing will receive $6.3 million while preservation of owner-occupied housing will receive
$5.5 million. The Housing Trust Fund will receive $23.5 million to support the development of affordable housing for low-
income persons and families. Minnesota Housing has regular RFP deadlines. Metro Cities will publicize these as the dates
and application information are announced.
Contract for Deed
Responding to concerns from cities, including Minneapolis, the Legislature made changes to a housing purchase finance
mechanism that has been gaining in popularity. A contract for deed purchase arrangement is a tool used by sellers who
are paid monthly by the purchaser. Some cities have reported landlords circumventing rental regulations by having
residents enter into a contract for deed arrangement instead of a rental lease. This has led to housing units not being kept
up to code as well as residents not having legal information about the contract they are signing, or not having funds to
make a lump sum or balloon payment at a point in the contract.
The new law requires a notice to be issued by a multiple seller to the purchaser. A multiple seller is a seller who has acted
as a seller in four or more contracts for deed involving residential real property during the 12-month period preceding the
sale. The notice includes information on who is responsible for paying property taxes, homeowner's insurance, and repairs
and maintenance. The notice must also include recommendations to the purchaser to get advice from an attorney or the
Home Ownership Center, get an appraisal and home inspection, buy title insurance, check with the city for inspection
records or unpaid utility bills, check with the county or title company to see if another mortgage or lien is on the property,
and to check with the Department of Commerce to see if your interest rate is legal (not higher than the maximum rate
allowed by law).
Affordable Housing (4d) Classification
Late in the session, a proposal to change an affordable housing tax classification was introduced. Metro Cities, the League
of Minnesota Cities and other groups with a stake in the financing and funding of affordable housing worked together to
find a solution to make development of class 4d affordable housing in higher market value neighborhoods economically
viable. Class 4d property is qualified low-income rental housing and has a tax classification of 0.75 percent.
The final provision, reached by the stakeholders, will create a second tier rate of 0.25 percent for remaining value over
$100,000, for assessment year 2014. The $100,000 value will be indexed each following year based on average statewide
changes in estimated market value. After two years, the Department of Revenue and Minnesota Housing Finance Agency
will release a report showing the statewide impact of the second tier rate and give lawmakers and housing advocates an
accurate picture of affordable housing in higher market value neighborhoods.
Metro Cities raised concerns about the proposal because it shifts property tax burdens, which our policies oppose. While
this solution will still have an impact on municipal revenues, it was preferable to other proposed options, and Metro Cities
and other stakeholder groups will be able to review the scope of the issue when the report is released.
Foreclosure & Dual Tracking
While an initial attempt at a broad "Homeowners Bill of Rights" bill stalled in the House and Senate, a secondary effort,
with a more limited scope was revived and passed at the end of session. Laws 2013, Chanter 115 prohibits dual tracking,
whereas a lender begins the foreclosure process while the borrower's efforts with the lender to retain ownership of the
property are pending. The bill applies to first lien mortgages that are owner occupied. The new law is effective August 1,
2013. VVnile dual tracking will be restricted due to new Consumer Financial Protection Bureau rules, the state law
implements the homeowner protection earlier.
METROPOLITAN COUNCIL
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Confirmations
The full Senate confirmed ten Met Council members in April. Receiving support were: Steven Chavez, Jon Commers,
John Doan, Adam Duininck, Steve Elkins, Richard Kramer, Jennifer Munt, Edward Reynoso, Sandy Rummel and Roxanne
Smith. The other six Met Council members received Senate confirmation in 2012.
Redistricting Map Approved
The legislature approved a new redistricting map for the Metropolitan Council responding to a requirement to modify
Council districts in the third year following the decennial census. Sen. Melissa Wiklund (DFL - Bloomington) and Rep.
Michael Nelson (DFL - Brooklyn Park) were the chief authors of the redistricting proposals. The map that was adopted
keeps current Council members from being paired (with the exception of the first district) and had the highest population
deviation among three maps considered by the Legislature.
The map that was signed into law would split three cities and towns into more than one district: Minneapolis, St. Paul and
Grey Island Township. Minneapolis and St. Paul have populations larger than the ideal district size of 178,098 residents,
forcing them to be split into more than one district. Officials from Scott County expressed a concern that in the new map, a
portion of Spring Lake Township is entirely surrounded by new Council district 4, while the rest of the township is located
within new Council district 16.
Metropolitan Council Appointment Process Open Through June 10.
Due to the redistricting, Governor Dayton will consider applicants for all 16 Met Council member appointments. Current
Met Council members are able to apply. Interested applicants must complete an Open Appointments Application Form,
from the Secretary of State's website and submit by June 10, 2013. A nominating committee will recommend candidates to
Governor Dayton, who may or may not accept a recommendation. The Met Council expects to announce the appointments
in July.
CAPITAL INVESTMENT
On the last night of session, the House and Senate passed a limited capital investment bill that was signed by Governor
Dayton. This bill was passed only days after the House voted down an $850 million statewide bonding proposal with
limited bipartisan support.
The final vote on the larger bill was 76-56, which was five votes shy of the 81 votes needed to reach the three-fifths
supermajority required for a bonding bill. That bill, HE 270, included $198 million for higher education, $59 million for
natural resources, $4.3 million for the Minnesota Zoo, $80 million for transportation, $111 million for local economic
development projects and $15 million for housing. The bill also contained $65 million for the Metropolitan Council. (The
Met Council appropriation included $2 million for I/1 grants), $18 million for regional parks and trails, and $45 million for the
transit capital improvement program and in the following transit way corridors: Bottineau Boulevard, East 7th Street in St.
Paul, 1-94 Gateway, Nicollet Avenue, Red Rock, Riverview, Robert Street, Rush Line, Snelling Avenue and Southwest.
Drawing upon strong bipartisan support for Capitol restoration funding, an agreed upon bonding package moved quickly
through the House and Senate the last night of session and Laws 2013, Chapter 136 was signed by Governor Dayton.
The bonding bill's primary provision was for $109 million to fund the next phase of ongoing work to the Capitol.
The compromise bonding package funds the following projects:
•$109 million for the Capitol renovation and restoration.
•$22.6 million for a new Capitol complex parking facility.
•$18.9 million for the Minneapolis Veterans Home repair and reconstruction.
•$20 million to the Department of Natural Resources for the state share of flood hazard mitigation grants to identified
local governments for approved projects.
•$8 million to the Public Facilities Authority (PFA) to match federal clean water and drinking water revolving loan funds.
Chapter 136 as passed did not include any funds for inflow and infiltration grants, which were included ($2 million) in the
original House bill. We expect to see a larger bonding bill in the 2014 legislative session.
ELECTIONS
A number of controversial elections bills were heard during the legislative session. Responding to Governor Dayton's
requirement that any elections-related bills must have bipartisan support, the DEL-led legislature pulled back several
initiatives at the end of session to secure legislation that could receive Republican support and be signed into law.
Laws 2013, Chapter 131 makes several changes to voting and election law.
Early Voting
Among the most controversial policies to be discussed in the elections committees, the DEL withdrew early voting
language during debate on the Senate floor, ensuring bipartisan support for the omnibus elections bill.
Absentee Voting
The new law allows for what has been termed no-excuse absentee voting, permitting any eligible voter to vote absentee
regardless of the reason. Previously, a voter had to be absent or otherwise unable to visit their polling location on election
day. The provision is effective for elections conducted on the date of the state primary in 2014 and after.
Absentee ballots received by election officials after 3 pm or after the last mail delivery must be marked as late.
Legislative District Changes
Two legislative districts were changed from the boundaries enacted by the Special Redistricting Panel on February 21,
2012. Districts 39A and 39B in the City of Stillwater and Stillwater Township were changed as were Districts 49A and 49B
in the City of Edina.
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Election Administration
Election officials will now be able to process absentee ballots seven days prior to election day. Current law only allows for
four days. A municipal clerk's office must be open for candidate filing from 1-5 pm on the last day of filing. A voter may only
vouch for no more than eight other voters; current law allows a voter to vouch for the residence of up to 15 other voters. An
exemption remains for employees of defined residential facilities.
Recounts
The elections bill reduced the threshold for which a state-funded full recount may be conducted for a federal, state
constitutional or judicial office. Current law requires an automatic recount when the vote difference is less than 0.5 percent.
The new law reduces that to a vote difference of 0.25 percent and requires the losing candidate to file a written request
within 48 hours. The threshold for legislative offices remains unchanged, at less than 0.5 percent.
For municipal, county or school district office, the new law modifies the vote difference thresholds for a recount. For
elections in which 50,000 or more votes are cast, a recount may be requested at the expense of the local government if
the difference between winning and losing candidates is 0.25 percent. If the number of votes cast is between 400 and less
than 50,000, a recount may be requested if the difference between winning and losing candidates is 0.5 percent. If 400 or
fewer votes were cast, a recount may be requested if the vote difference is 10 votes or fewer.
Special Elections
The new law prohibits a special election to fill a vacant legislative seat from occurring during the four days before or after a
state holiday.
Electronic Rosters
The law establishes a pilot project and task force to test the use of electronic rosters. For the pilot project, electronic
rosters may be used for same day registration and/or to verify preregistered voters.
Metro
Cities News is emailed periodically to all Metro Cities member mayors, councilmembers, city manager/administrators and most department heads
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you or someone else would like to receive the Metro Cities News, please email Laurieiffimetrocitiesmn.orrt and provide the following: Name, Title,
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SECTION II— GENERAL POLICIES
City Council Code of Policies
2.21 Financial Management Policies
1.Purpose
The City of Brooklyn Center has a responsibility to its citizens to carefully account for
public funds, to manage municipal finances wisely, and to plan the adequate funding of
services desired by the public, including the provision and maintenance of public
facilities. The City also has the responsibility to its citizens to provide both short-term
and long-term future financial stability. The City must ensure that it is capable of
adequately funding and providing local government services needed by the community.
Further, the financial policies set forth herein, provide the basic framework for the overall
fiscal management of the City. Operating independently of changing circumstances and
conditions, these policies assist the decision making process of the City Council and
Administration.
Most of the policies represent long-standing principles, traditions and practices which
have guided the City in the past and have helped maintain financial stability over the past
years. The financial policies will be reviewed periodically to ascertain if modifications
are necessary.
2.Objectives
In order to achieve this purpose, this plan has the following objectives for the City's
fiscal performance:
A.To protect the City Council's policy-making ability by ensuring that important
policy decisions are not controlled by financial problems or emergencies and to
prevent financial difficulties.
B.To provide sound principles to guide the important decisions of the City Council
and of management which have significant fiscal impact and to enhance the City
Council's policy-making ability by providing accurate information on program
costs.
C.To set forth operational principles which control the cost of local government, to
the extent consistent with services desired by the public and which lower financial
risk.
D.To employ revenue policies which mitigate undue or unbalanced reliance on
certain revenues, especially property taxes; which distribute the costs of
municipal services fairly; and which provide adequate funds to operate desired
program and assist sound management of the city government by providing
accurate and timely information on financial conditions.
E. To provide essential public facilities and prevent deterioration of the City's public
facilities and its capital plant.
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City Council Code of Policies
F.To protect and enhance the City's credit rating and prevent default on any
municipal debts.
G.To ensure the legal use and protection of all City funds through a quality system
of financial and internal controls.
H. The City will maintain a Risk Management Program that will minimize the
impact of legal liabilities, natural disasters or other emergencies.
3. Financial Management Policies
A. Capital Improvement Budget Policies
1.The City will make all capital improvements in accordance with an
adopted Capital Improvement Budget.
2.The City will develop a multi-year plan for capital improvements and
update it at least biennially.
3.The City Council will adopt the annual Capital Improvements Budget
based on the multi-year capital improvement plan. Future capital
expenditures necessitated by changes in population, changes in real estate
development, or changes in economic base will be calculated and included
in Capital Budget projections.
4.The City will coordinate development of the Capital Improvement Budget
with the development of the operating budget. Future operating costs
associated with new capital improvements will be projected and included
in operating budget forecasts.
5.The City -will use intergovernmental assistance to finance only those
capital improvements which are consistent with the adopted capital
improvement plan and City priorities and for which operating and
maintenance costs have been included in operating budget forecasts.
6.The City will project its equipment replacement and maintenance needs
for the next several years and will update this projection each year. From
this projection, a maintenance and replacement schedule will be developed
and followed.
7.The City staff will identify the estimated costs and potential funding
sources for each capital project proposal before it is submitted to the City
Council for approval.
8.The City will determine the least costly financing method over the length
of all new projects.
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City Council Code of Policies
B. Revenue Policies
1.The City will attempt to maintain a diversified and stable revenue system
to shelter it from short-run fluctuations in any one revenue source and to
minimize property taxes.
2.The City will estimate its annual revenue by an objective conservative
analytical process.
3.The City will project revenues for the next three years and will update this
projection annually. Each existing and potential revenue source will be
reexamined annually.
4.The City will maintain sound appraisal procedures to keep property values
correct. Property will be assessed at the legally mandated market value
for each type of property. Reassessments will be made of all property at
least every five years.
5.The City will follow an assertive policy of collecting property tax
revenues. The annual level of uncollected property taxes should generally
not exceed two percent.
6.Each year the City will recalculate the full costs of activities supported by
user fees to identify the impact of inflation and other cost increases.
7.The City staff will recommend revised user fees with review by the City
Council on an annual basis, to adjust for cost factors and inflation on the
City's cost of providing services.
8.The City will set fees and user charges for each Enterprise Fund, such as
Water and Sewer, at a level which fully supports the total direct and
indirect costs of the activity. Indirect costs include the cost of annual
depreciation of capital assets.
9. User charges and fees determined to be appropriate for City services will
generally be established at a level which will recover the full cost of
providing the service, including administrative costs.
C. Debt Policies
1.The City will confine long-term borrowing to capital improvements or
projects which cannot be financed from current revenues.
2.When the City finances capital projects by issuing bonds, it will pay back
the bonds within a period not to exceed the expected useful life of the
project.
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City Council Code of Policies
3.On all projects, at least 50% of the principal shall be retired within ten
years.
4.The City will make every attempt to keep the average maturity of General
Obligation Bonds at or below 20 years. •
5.Total debt service payments for General Obligation debt will not exceed
five percent of total annual locally generated operating revenue in the
general, special revenue, and proprietary funds.
6.Total outstanding General Obligation debt will not exceed two percent of
the market valuation of taxable property.
7.Where possible, the City will use special assessment, revenue or other
self-supporting bonds instead of General Obligation Bonds.
8.The City will not incur debt to support current operations.
9.The City will maintain good communications with bond rating agencies
regarding its financial condition. The City will follow a policy of full
disclosure in every financial report, official statement, and bond
prospectus.
10.Direct net-debt (gross debt less debt fully supported by non-property tax
revenues) per capita shall not exceed $600 per capita.
11.The City will require Minimum Assessment (Taxable Valuation)
Agreements on all projects in which the City is providing development
assistance through tax increment financing or committing its bonding
authority. This will ensure minimal cash flow (increment) to repay
obligations, provide another level of review before commitment (by the
City Assessor), and to the minimal value agreed upon, eliminate tax
appeals during the agreement period.
12.For purposes of this section, tax increment revenues are classified as a
non-property tax revenue source.
D. Fund Balance Policy
1.The City shall manage its cash flow needs by having a target unrestricted
and unassigned General Fund balance at the close of each fiscal year of 50
to 52% of the next year's General Fund operating budget.
2.Unassigned General Fund monies that are not required for cash flow
purposes may be transferred into other funds as may be appropriate or
needed during the fiscal year. It is specifically anticipated that transfers
will be made to the Street Reconstruction Fund, Capital Improvements
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City Council Code of Policies
Fund, and the Technology Fund when operating results generate a surplus
of actual revenues over actual expenditures to serve as a recurring source
of funding for those three funds.
3.The City Council authorizes the City Manager or the City Manager's'
designee to assign fund balance that reflects the City's intended use of
those funds for the purposes of reporting the City's financial position.
4.'When both restricted and unrestricted resources are available for use, it is
the City's policy to first use restricted resources and then use unrestricted
resources as they are needed, unless otherwise required by the restricting
authority. When unrestricted resources are available for use, it is the
City's policy to use resources in the following order: 1) committed 2)
assigned 3) unassigned.
E. Investment Policies
1.The City will make cash flow analysis of all funds on a regular basis.
Disbursement, collection and deposit of all funds will be scheduled to
ensure maximum cash availability.
2.When permitted by law, the City will pool cash from several different
funds for investment purposes.
3.The City will invest at least 98% of its idle cash on a continuous basis.
4.The City will analyze market conditions and investment securities to
determine what yield can be obtained, and attempt to secure the best
possible return on all cash investments.
5.The City's accounting system will provide regular information concerning
cash position and investment performance.
6.The City will maintain a, formal written investment policy which will
contain legal and administrative guidelines necessary to ensure that the
City's available funds will be invested to the maximum extent possible, at
the highest rates obtainable at the time of the investment, consistent with
minimizing credit and market risk and which provides proper safeguards
for the keeping of the City's investments.
F. Accounting, Auditing and Financial Reporting Policies
1.The City will establish and maintain a high standard of accounting
practices in conformance with generally accepted accounting principles.
2.The accounting system will maintain records on a basis consistent with
accepted standards for local government accounting using GASB 34 as the
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City Council Code of Policies
basis of accounting for all governmental funds and an accrual basis of
accounting for Enterprise and Internal Service Funds. Accounting policies
will reflect the principle of charging current taxpayers and/or users for the
full cost of providing current services.
3. Regular monthly and annual financial reports will present a summary of
financial activity by major types of funds as determined by the prior year's
Comprehensive Annual Financial Report.
4: Where possible, the reporting system will provide monthly information on
the total cost of specified services by type of expenditure and, if necessary,
by fund.
5. An independent public accounting firm will perform an annual audit and
will publicly issue an opinion concerning the City's finances.
G. Risk Management Policies
1. The City will maintain a Risk Management Program that will minimize
the impact of legal liabilities, natural disasters or other emergencies
through the following activities:
a.Loss Prevention. Prevent negative occurrences.
b.Loss Control. Reduce or mitigate expenses of a negative
occurrence.
c.Loss Financing. Provide a means to finance losses.
d.Loss Information Management. Collect and analyze relevant data
to make prudent loss prevention, loss control and loss financing
decisions.
2. The City's Risk Management Program will:
a.Analyze all the City's risks.
b.Avoid risks whenever possible.
c.Reduce risks whenever possible.
d.Transfer risks to other entities when possible.
e. Of those risks that must be retained, it shall be the City's policy to
fund risks which the City can afford and transfer all other risks to
insurers.
3.The City will maintain an active Safety Committee comprised of City
employees.
4.The City will periodically conduct educational safety and risk avoidance
programs, through its Safety Committee and with the participation of its
insurers, within its various departments.
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5. The Safety Committee will report to the City Manager, at least annually,
on the results and costs of the City's Risk Management Program for the
preceding year. The City Manager shall report annually to the City
Council.
H. Operating Budget Policies
1.In accordance with Chapter 7, Section 7.06 of the City Charter, the total
sum appropriated in the General Fund annual budget shall be equal to the
total estimated General Fund revenue and any allocated General Fund
balance.
2.The City will pay for all current expenditures with current revenues. The
City will avoid budgetary procedures that balance current expenditures at
the expense of meeting future year's revenues, or rolling over short-term
debt, or that rely on accumulated fund balances to meet current
obligations.
3.The City will annually appropriate a contingency appropriation in the
General Fund budget, not to exceed five percent of the total budget, to
provide for unanticipated expenditure of a non-recurring nature.
4.The City Manager, when submitting the Proposed Budget to the City
Council, shall submit a balanced General Fund budget in which
appropriations shall not exceed the total of the estimated General Fund
revenue and any fund balance appropriated by the City Council.
5.Prior to adopting the General Fund Annual Budget, the City Council shall
review the Reserve Policy.
6.In the event that there is a shortfall of revenues in a current year budget,
the City Manager may recommend the use of a portion of the General
Fund balance not to exceed the amount available after deducting amounts
reserved for items not readily convertible to cash or reserved for working
capital.
7.The budget will provide for adequate maintenance of the capital plant and
equipment, and for their orderly replacement.
8.The budget will provide for adequate funding of all retirement systems.
9.The City will maintain a budgetary control system to assist in adhering to
the budget.
10.The City administration will prepare regular monthly reports comparing
actual revenues and expenditures to the budgeted amount.
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City Council Code of Policies
11.Each year the City will update expenditure projections for its Enterprise
Funds for at least the ensuing five years. Projections will include
estimated operating costs of future capital improvements included in the
Capital Budget.
12.The Operating Budget will describe the major goals to be achieved, and
the services and programs to be delivered for the level of funding
provided.
13.Where possible, the City will integrate performance measurement and
productivity indicators with the budget.
14.Enterprise funds shall be budgeted to have positive net income plus a
sufficient margin to provide for replacement cost of property, plant, and
equipment.
I.Ethics Policy
The City will maintain, and periodically review, a formal written ethics policy for
all City employees and elected officials.
J.Role of Auditors
The City's independent auditors shall be required, in the course of their audit, in
the content of their Management Letter, to report any conditions that appear to be
violations of our financial management policy.
Reference: City Council Resolution Nos. 2011-167; 2006-120; 2004-189; 99-21; 98-48; City
Council Minutes 5/22/95; 6/8/92; 2/26/90; 12/22/80
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